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Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices
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volume-weighted average price VWAP over the subsequent fiveminute period, or the difference between the Closing Auction price and the consolidated VWAP over the two minutes preceding the Closing Auction;
the lower the difference, the lower the auction price dislocation. In February 2020, the Exchanges average Core Open Auction dislocation was 3.27x a securitys average spread; for the period July 2020 through October 2020 the average was 3.22x a securitys average spread.19 Similarly, the median Core Open Auction dislocation fell from 1.84x a securitys average spread to 1.78x a securitys average spread.
The Exchange also observed similar trends in the Closing Auction price dislocation statistics. In February 2020, the Exchanges average Closing Auction Price Dislocation was 0.82x a securitys average spread; for the period July 2020
through October 2020, the average was 0.69x a securitys average spread.20
Median Closing Auction dislocation also dropped from 0.5x to 0.43x a securitys average spread in the respective periods. Because the temporary wider percentage parameters have not resulted in greater auction price dislocation, the Exchange believes that making these parameters permanent would continue to support fair and orderly Auctions on the Exchange.
To effect these changes, the Exchange proposes to:
Amend Rule 7.35Ac1G to replace the current 4% price parameter for Core Open Auctions with a 10%
price parameter and amend Rule 7.35Ac1H to replace the current 4%
price parameter for Trading Halt Auctions with a 5% price parameter.
Because the proposed price parameter would be 10% for Core Open Auctions, the Exchange believes that the need for the double-wide parameters set forth in Rule 7.35Ac2 for Core Open Auctions would no longer be necessary and the Exchange proposes to delete that text.
Delete the volume parameters specified in Rule 7.35Ac1H.
Amend Rule 7.35Aj1A to delete reference to volume parameters.
Amend Rule 7.35Bc1G to replace the reference to designated percentage parameter for the Closing Auction with a 10% price parameter.
19 Market volatility was, on average, lower in February 2020 as compared to July 2020October 2020. Calculating the price dislocation metric in terms of a securitys average spread incorporates the wider spreads in the latter period and allows for a better comparison between the two periods.
20 Closing Auction price dislocation is generally lower than Core Open Auction price dislocation, due to the relatively lower levels of volatility around the Closing Auction compared to the Core Open Auction.

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The Exchange further proposes to delete the chart specifying the designated percentages for the Closing Auction.
Delete Rule 7.35Bc1H.
Delete Commentaries .01a and b to Rule 7.35A.
Delete the entirety of Commentary .01 to Rule 7.35B.
The Exchange proposes to maintain Commentary .01c to Rule 7.35A, which provides that for a temporary period that begins March 23, 2020, when the Trading Floor facilities have been closed pursuant to Rule 7.1c3, and ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on December 31, 2020, the requirement to publish a pre-opening indication pursuant to Rule 7.35Ad before either a Core Open Auction or Trading Halt Auction is suspended. The Exchange proposes non-substantive amendments to delete subparagraph c numbering and move the text of that subparagraph into the body of Commentary .01.21
Proposed Changes to Applicable Price Range for Pre-Opening Indications The Exchange proposes to make permanent that the Applicable Price Range for determining whether to publish a pre-opening indication for a Core Open Auction would be 10% for securities with an Indication Reference Price higher than $3.00 and $0.30 for securities with an Indication Reference Price equal to or lower than $3.00, which is currently in effect on a temporary basis, as set forth in Commentary .06 to Rule 7.35A. The Exchange further proposes that the Applicable Price Range for determining whether to publish a pre-opening indication for a Trading Halt Auction would be 5% for securities with an Indication Reference Price over $3.00
and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00.
Rule 7.35Ad1A currently provides that a DMM will publish a preopening indication before a security opens or reopens if the Core Open or Trading Halt Auction is anticipated to be a change of more than the Applicable Price Range, as specified in Rule 7.35Ad3, from a specified Indication Reference Price, as specified in Rule 7.35Ad2.
Rule 7.35Ad3A provides that the Applicable Price Range will be 5% for 21 The Exchange notes that even though the requirement for pre-opening indications has been suspended, since June 17, 2020, when DMMs returned staff to the Trading Floor, DMMs have published pre-opening indications for IPO Auctions and the two Direct Listing Auctions on September 30, 2020.

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securities with an Indication Reference Price over $3.00 and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00. Rule 7.35Ad3B further provides that, If as of 9:00 a.m., the E-mini S&P 500
Futures are +/2% from the prior days closing price of the E-mini S&P 500 Futures, when reopening trading following a marketwide trading halt under Rule 7.12, or if the Exchange determines that it is necessary or appropriate for the maintenance of a fair and order market, the Applicable Price Range for determining whether to publish a preopening indication will be 10% for securities with an Indication Reference Price over $3.00
and $0.30 for securities with an Indication Reference Price equal to or lower than $3.00.

Current Rule 7.35A1A further provides that a DMM may not effect a Core Open or Trading Halt Auction electronically if a pre-opening indication has been published for the Core Open Auction. Accordingly, Exchange Rules already provide for a correlation between pre-opening indications and whether a DMM may effect a Core Open or Trading Halt Auction electronically. Currently, that is achieved through similar, though not identical, percentage parameters: The price parameter for DMM-facilitated electronic Core Open and Trading Halt Auctions is 4% and the Applicable Price Range for pre-opening indications is 5%. When there is market-wide volatility, both are doubled.
The Exchange believes that because of this existing correlation, in connection with permanently widening the price parameters for DMM-facilitated electronic Core Open Auctions to 10%, the Applicable Price Range for determining whether to publish a preopening indication should similarly not only be widened, but also be aligned to 10%. Similarly, because the price parameters for DMM-facilitated electronic Trading Halt Auctions would be 5%, the Applicable Price Range for determining whether to publish a preopening indication should be aligned to be 5%. With these proposed changes, if there is a significant enough price movement to require a DMM to effect a Core Open or Trading Halt Auction manually, the DMM would be required to publish a pre-opening indication for such Core Open or Trading Halt Auction. The Exchange notes that if a DMM chooses to facilitate a Core Open Auction or Trading Halt Auction manually i.e., if there is less than a 10%
price movement for a Core Open Auction or 5% price movement for a Trading Halt Auction, a DMM could still choose to publish a pre-opening indication in connection with such Auction, even if the Applicable Price
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